Connecting Australia: How technology is levelling the playing field for small business

Small businesses that invest more in technology also tend to grow revenue and employment faster than their peers, analysis reveals.

Technology is helping to close the gap between large and small businesses, with high-speed internet connections democratising access to powerful productivity-enhancing tools that have underpinned the commercial success of large enterprises for so long. But the gap is closing too slowly.

In a project commissioned by nbn, AlphaBeta analysed two years of aggregated and anonymised accounting data from tens of thousands of Australian small businesses on Xero. Our analysis revealed a clear correlation between technology investment and business performance:

  • Businesses in the highest quartile of technology spending growth grew revenues and employment by an average of 4.9% and 4.7% a year, while businesses in the lowest quartile saw only 1.4% of revenue growth and shed 0.4% of jobs.
  • Internet spending was the strongest indicator of firm performance among all technology spending categories. Firms with the highest internet spending growth grew revenue and employment by 6% and 4.8% respectively, versus 0.3% and -0.6% for those in the lowest quartile.

Despite these benefits, the average Australian small business spends a modest $5,000 a year on technology, representing less than 1% of revenue. Small businesses are using the internet to connect with customers and suppliers at only half the rate of larger businesses. They are also far less likely to use technology to support business processes such as stock control, marketing, business planning, production operations, invoicing, payroll and accounting.

Small businesses are critical to the Australian economy, accounting for 98% of all businesses and almost 5 million jobs. Increasing technology adoption among Australian small businesses would help these firms be more productive, successful and competitive. It would also have significant benefits for the wider economy.

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